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Homework answers / question archive / You are considering a car loan with a stated APR of 6

You are considering a car loan with a stated APR of 6

Finance

You are considering a car loan with a stated APR of 6.09?% based on monthly compounding. What is the effective annual rate of this? loan?

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Effective annual rate of loan= ((1+ (APR/ No. of period))^ No. of period)- 1

here,

APR= 6.09%

No. of period (monthly)= 12

 

Put the values in the formula;

= ((1+ (6.09%/ 12))^ 12)-1

= 6.26%

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